5 Tips For A Good Forex System
Friday, November 6, 2009
Maybe you a already involved in forex trading or maybe you are just starting out. Irrespective, with there being so many products, strategies and systems available on the market today, it becomes increasing difficult to choose a forex system. So what is a good forex system?
In my experience, the five basic characteristics of a good forex system are as follows:
- It should be consistent and "unemotional". What I mean by this is that you want to avoid erratic trading behaviour. You want a system that does the correct thing most of the time, over and over again. There is no system that can claim 100% profitable trades, but you want a system that performs profitable trades most of the time. The system should allow the trader to only trade on predetermined criteria or market conditions and not on emotions.
- It should use tested trading strategies. The system should have been thoroughly tested, both back and forward testing and preferably also on live account. This is to demonstrate the effectiveness of its strategy. You want to follow a system that has proven itself and can show results.
- It should preserve capital. Without capital you cannot trade. Your aim is firstly to make profit but also to minimise capital erosion or draw-down. Therefore, the system should incorporate stop-loss strategies and parameters. The one thing you want to avoid is to have 10 or 20 consecutive profitable trades followed by one "wipe-out" trade. Capital preservation is a very important aspect of any good forex system.
- It should fit in with the trader's circumstances and approach. Some systems may be better than others, but might be completely wrong for the trader's circumstances. You may have a day job and cannot trade for a large part of the day - an intensive manual system requiring dedicated focus for many hours a day may then not be your answer.
- It should be adaptable. What I mean by this is that the system should cater for changes in market conditions, for example release of important market data and adapt its strategy accordingly. Not only must it be able to adapt to market conditions, but also to the individual. All traders follow different strategies in terms of lot size, profit targets, stop-loss settings, etc. The systems should at least allow you to trade according to the strategy you feel comfortable with.
0 comments: to “ 5 Tips For A Good Forex System ”
Post a Comment